IMF Projects Negative GDP Growth for Nigeria in 2020
•Predicts rebound to 2.4% in 2021
International Monetary Fund (IMF) has predicted a negative Gross Domestic Product (GDP) of -3.4 per cent for Nigeria in 2020, due to the ongoing disruptions caused by the COVID-19 pandemic.
IMF Chief Economist and Director of the Research Department, Ms. Gita Gopinath, gave the projection during an online press conference on the latest World Economic Outlook (WEO) released yesterday, at the ongoing virtual Spring Meetings of the IMF/World Bank in Washington DC.
The Nigerian economy grew by 2.27 per cent in full-year 2019.
According to Gopinath, sub-Saharan Africa is also projected to record a negative GDP growth of -1.6 per cent, with GDP growth in the continent’s second largest economy, South Africa, also expected to weaken to –5.8 per cent.
Nevertheless, IMF predicted that in full-year 2021, GDP growth for Nigeria would rebound to 2.4 per cent
She noted that following the dramatic decline in oil prices since the beginning of the year, near-term prospects for oil-exporting countries have deteriorated significantly, adding that a much larger fraction of countries would experience negative per capita income growth in 2020 than at the time of the 2009 financial crisis.
“These countries account for a broadly similar purchasing-power-parity share of the world economy compared with the group that experienced negative per capita income growth in 2009,” she explained.
She stated that among emerging market and developing economies, all countries faced a health crisis, severe external demand shock, dramatic tightening in global financial conditions and a plunge in commodity prices, which would have a severe impact on economic activity in commodity exporters.
“Overall, the group of emerging market and developing economies is projected to contract by one per cent in 2020; excluding China, the growth rate for the group is expected to be –2.2 per cent.
“Even in countries not experiencing widespread detected outbreaks as of the end of March (and therefore not yet deploying containment measures of the kind seen in places with outbreaks) the significant downward revision to the 2020 growth projection reflects large anticipated domestic disruptions to economic activity from COVID-19.
“The 2020 growth rate for the group excluding China is marked down 5.8 percentage points relative to the January WEO projection,” she added.
IMF also projected global growth to rebound to 5.8 per cent in 2021, well above trend, reflecting the normalisation of economic activity from very low levels.
IMF estimated that the GDP of the group of advanced economies would grow at 4.5 per cent.
The fund noted that a rebound in GDP growth for the world in 2021 would depend “critically on the pandemic fading in the second half of 2020, allowing containment efforts to be gradually scaled back and restoring consumer and investor confidence.”
It added: “Significant economic policy actions have already been taken across the world, focused on accommodating public health care requirements while limiting the amplification to economic activity and the financial system.
“The projected recovery assumes that these policy actions are effective in preventing widespread firm bankruptcies, extended job losses and system-wide financial strains.
“Nonetheless, the level of GDP at the end of 2021 in both advanced and emerging market and developing economies were expected to remain below the pre-virus baseline.”
The report also stated that as with the size of the downturn, there was extreme uncertainty around the strength of the recovery.
“Some aspects that underpin the rebound may not materialise and worse global growth outcomes are possible – for example, a deeper contraction in 2020 and a shallower recovery in 2021 – depending on the pathway of the pandemic and the severity of the associated economic and financial consequences.
“With the world facing a dramatic health and economic crisis in 2020, the policy response needs to be commensurate with the challenge.
“Effective policies are essential to forestall worse outcomes. As a first priority, resources should be made available for health care systems to cope with the surging need for their services.
“This means expanding public spending on additional testing, rehiring retired medical professionals, purchasing personal protective equipment and ventilators and expanding isolation wards in hospitals.”
IMF advised that trade restrictions on medical and health products should be avoided to ensure that they are able to go to where they are most critical, adding that international aid to provide support to countries with limited health care system capacity and resources would be needed to help them prepare for and weather the pandemic.
It called on countries with large informal sectors, often emerging market and developing economies, to expand support programmes and introduce new ones where feasible.
Further development of digital payments systems, which have seen rapid growth in many emerging market and developing economies may provide an opportunity to improve the delivery of targeted transfers to the informally employed, IMF added.